PNB scam: Won't tolerate irregularities in financial sector, says PM Modi

I want to appeal to those who have been given the task of framing rules and maintaining ethics in financial institutions to perform their duty with full faith, said Modi

Prime Minister Narendra Modi on Friday told financial players, auditors, and regulators to perform their duties diligently, warning that the government would not tolerate irregularities in the sensitive sector.

Without mentioning the Punjab National Bank (PNB) fraud or the Reserve Bank of India, Modi said, “I want to appeal to those who have been given the task of framing rules and maintaining ethics in financial institutions to perform their duty with full faith, particularly those who have been given the responsibility of monitoring and supervision.”

The prime minister said the government was taking strict action against those behind financial irregularities. “We will continue to take action,” he said, addressing a function. Inappropriate use of the people’s money, he added, would not be accepted by the new system created by the government.

He reminded the audience that his government had inherited the twin balance-sheet (TBS) problem from the previous regime.

TBS refers to challenges posed by non-performing assets of banks and over-leveraged companies, which hamper the revival of private investments in the economy.  

“You are familiar with older systems of banks, which led to crony capitalism getting entrenched into the system,” he said.  

Earlier this week, Finance Minister Arun Jaitley had blamed senior officials of public sector banks (PSBs), lenders’ auditors, and the regulator for the financial fraud.

“The prime minister himself said at a Gyan Sangam that we want you (banks) to be autonomous, none of us is going to call you up, and, therefore, take your own decisions. When authority is given to the management, you are expected to utilise that authority effectively and in a right manner. Therefore, the question for the management itself is, was it found lacking? And on the face of it, the answer seems yes. You are found lacking when you are unable to check who among them were delinquents,” Jaitley had said.

On Monday, the government had written to the RBI, asking if the banking regulator had detected the PNB fraud at any stage.

Last week, Chief Economic Advisor Arvind Subramanian said the internal audit had broken down at PNB, but wondered how external audits had failed, too.